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Soft-landing scenario becomes more credible

Key U.S. economic data surprised to the downside in August, shifting the market theme from expecting steady expansion toward a soft-landing scenario of falling inflation. The total nonfarm payrolls increase of 187,000 was higher than expected, but because gains in previous months were revised downward, the August gains were broadly in line with the trend. Average hourly earnings slowed to 0.2% month over month, the slowest pace in the past 18 months, a downward trend that should please both the market and the Federal Reserve.

European data remained weak. The manufacturing sector in the region continued to show signs of bottoming. Headline inflation in the euro area was unchanged, while core inflation declined. Energy inflation picked up, but food inflation declined and passed through to core services components.

In China, manufacturing data improved.

LONG-TERM CYCLE

This six-year illustration shows stable GDP up until the collapse from the coronavirus pandemic.

Source: Putnam. Data as of August 31, 2023. We base our Global GDP Nowcast on a tailored methodology that captures daily data releases for the most essential growth characteristics for each of 25 countries — including purchasing managers' index data, industrial production, retail sales data, labor market metrics, real estate price indexes, sentiment indicators, and numerous other factors. The mix of factors used for each market may change over time as new indicators become available from data sources or if certain factors become more, or less, predictive of economic growth.

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